The US Military-Industrial Complex Strikes Again

We’re on a rollercoaster ride right now.

The Dow Jones was up 1.79% overnight.

President Xi of China got the credit for his conciliatory remarks about opening up China’s economy further.

This lessened tensions surrounding the trade war rhetoric.

Aussie stocks rallied strongly yesterday.

Will this clear the air for the ASX 200 to move back up above 6,000 points?

Possibly.

But the index isn’t the most interesting place to be watching right now.

If I had to pick the market most likely to make you money right now — and fast — it’s this…

Saudi Arabia keeps trying to rig market

In my view, there’s no better bet in the market right now than the oil sector.

The word around Saudi Arabia at the moment is that head honchos want oil to hit US$80 a barrel for the Brent benchmark.

It’s US$71 now, after rising 3% in recent trade.

Saudi Arabia wants higher oil prices in part to fund its heavy domestic spending.

It also wants to support the coming part-privatisation of the national oil company, Saudi Aramco.

The Crown Prince of Saudi Arabia admitted as much to Time magazine recently.

Here’s the catch: The Saudis can’t control the price of oil. The only thing they can do is drop production from existing fields to crimp supply.

But there’s nothing stopping other oil producers taking advantage of the gap and filling up the market.

So Saudi Arabia has to try and coerce members of OPEC and other major oil-producing countries like Russia to go along.

The wild card is that tensions forming in the Middle East turn into a full-blown regional flare-up.

That would send oil prices higher.

And you also have the strange case of Donald Trump’s reversal on Syria to think about too…

US Army out one week, in the next

On 3 April, President Trump was quoted as saying…

I want to get out. I want to bring our troops back home. I want to start rebuilding our nation.

Not long after, a chemical attack is reported to have occurred in Syria. The actual evidence about who is responsible is vague.

Anyone with a basic knowledge of US interventions throughout the last century knows most of them were based on lies and propaganda.

Saddam Hussein, for example, never had weapons of mass destruction.

Now the White House is saying that all options are on the table when it comes to Syria.

Coincidence? Unlikely.

At the same time, the FBI has raided the office of Trump’s long-time lawyer. And then there is the Stormy Daniels saga that continues to drag on.

It seems to me that every time Trump suggests withdrawing US forces or focusing more on America, his presidency is destabilised with scandals and allegations.

The US military industrial complex might not mind a wall with Mexico, but it won’t stand for peace breaking out in the world…or US troops standing on US soil.

How would all the US Army contractors make money or get access to raw materials?

The war hawks are in control and, if Trump doesn’t toe the line, they’ll find — or fabricate — enough dirt to get rid of him.

The US administration continues to isolate Russia and Iran with sanctions and rhetoric.

They also happen to be two of the biggest oil producers. If US sanctions squeeze hard enough to restrict the flow of oil, they certainly could send prices higher.

Heaven help us if Iran or Russia are drawn openly into a conflict in Syria against the US.

That makes a strategic bet on oil worth holding. If nothing happens, a strengthening economy should hold oil prices in good stead. If the situation in the Middle East goes from bad to worse, energy assets outside of the hot zone will be revalued higher.

Perpetual war for perpetual peace

I’m confused as well…

It was only a few months ago that North Korea was supposed to be the big danger in the world. In fact, my colleague Jim Rickards was convinced in 2017 that the US would go to war with North Korea in March.

What happened to that?

I guess it doesn’t really matter unless there’s some nation filling the role of bogeyman threatening world peace and requiring intervention.

It may not make for peaceful sleeping, but it does make for profitable armaments manufacturing.

There are no sure things in the financial world, but investing in US ‘defence’ firms gets pretty close.

Writer Gore Vidal said it best years ago: ‘Perpetual war for perpetual peace.

I happen to know one financial editor that’s been recommending US defence firms since he began writing in 1991.

At least two of them are up 8,000%.

And now we hear that the US federal deficit is on track to top US$1 trillion in 2020.

It’s not hard to guess where most of this money is going to go, is it?

This article was originally published by Daily Reckoning Australia

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